Update on the State of Investing

It has been several months since I have posted to my very own “What My Intuition Tells Me Now” blog.  Clearly that is a long absence.  However, I promise you that I did not abandon you and your interests.  My last guidance on the blog has held up until this point.  However, I now feel that an update on the state of investing is needed.

Specifically it is my intuitive sense that the European sovereign debt crisis, while not resolved and while not impotent in its ability to cause multi-percentage point drops in equity indices, has passed the point of metastasizing.  Put another way, I feel that investors around the world are at the point where they are no longer insisting on a resolution to the European sovereign debt crisis.

What seems to have occurred is that folks have done their research and are fairly aware of the scale and scope of the debt disease’s symptoms.  That awareness has led to a greater propensity to turn attentions toward investment opportunities and a greater receptivity to take risks.  For me it looks like the place to start is in the United States and its businesses.

U.S. corporate profitability is at an all time high, yet prices have not appreciated to the same degree as earnings per share.  What that means is that the financial markets look inexpensive to me.

So what makes sense in this situation?  I have recommended to several friends that an allocation of half of your portfolio to U.S. equities looks attractive.  Me?  I have a greater proportion in small-capitalization stocks because I feel that the innovations incubated within them are likely to be highly rewarded with price appreciation going forward.

Additionally, I can’t help but think as I always do, about investments that pay actual hard cash to their investors.  That category would include: convertible securities, preferred stocks, high-dividend paying stocks and corporate bonds.  Especially intriguing to me would be a short to medium-duration corporate bond fund with an average credit rating of A to BBB+.  Does such a thing exist?  I dunno.

Lastly, certain overseas markets look interesting.  For example, Russia.  Yes, Russia.  Look for a way to own Russia broadly, like an ETF.  Why Russia?  Because they have a renewed commitment to stable capital markets as they are starved for Western capital.  Additionally, the nation is awash in cash as high energy prices have bolstered the nation’s coffers.  Lastly, debt rich/interest payment rich Europe needs cash rich Russia.

Jason